2. Introduction
 Generally person is liable to pay tax only on the income
which is earned by him.
 However under Income Tax Act 1961 there are certain
provisions as per which an income of though legally
belonging to one person is to be included in the total
income of other person.
 Inclusion of others income in the income of assessee is
called “Clubbing of income” and such clubbed income
is termed as “Deemed Income”.

3. 1. Income of other persons to be included in the income of
individual( Section 60-65)
2. Income received from Firm assessed as Firm And
Association of Persons (Section 66-67)
3. Deemed Income (Section 68-69)

5. Transfer of Income without
Transfer of Assets[Sec. 60]
If assessee transfers to another person some
income but without the transfer of assets
producing that income.
 The income from the asset would be taxable in
the hands of the transferor. (the person who
transfer the asset).
 The transfer may be revocable or may not be
revocable.
 The transfer may be effected at any time.

6. Revocable Transfer of Assets
[Sec. 61]
 By virtue of Section 61, if an asset is transferred under a
“revocable transfer”, income from such asset is taxable in
the hands of the transferor and shall be included in his
total income.

7. Section-63 defines “transfer” &
“revocable transfer”
a) A transfer shall be deemed to be revocable if
I. It contains any provision for the re-transfer directly or
indirectly of the whole or any part of the income or
assets to the transferor.
II. It, in any way, gives the transferor a right to reassume
power directly of the whole or indirectly over the whole
or any part of the income or assets.
b) ”Transfer” includes any settlement, trust, covenant,
agreement or arrangement.

8. Provisions of Section-62(1)
Provisions of Section-61 shall not be applicable in following
revocable transfers.
If a) the transfer is by way of trust which is not revocable
during the life time of the beneficiary.
Or
b) transfer is otherwise than by way of trust and is not
revocable during the life time of the transferee
Or
c) transfer is made before the 1st day of April 1961, which is
not revocable for a period exceeding six years.
And
d) the transferor does not derive any benefit from such
income.

9. An Individual is assessable in respect
of remuneration of spouse
[Sec.64(1)(ii)]
 If an individual has got a substantial interest in any
company or concern, then any income accruing to the
spouse of such individual from that concern/company
shall be included in the total income of the individual
having substantial interest in such concern.
 The income to the spouse may be by way of salary, bonus,
commission fee or any other remuneration.

10.  In case of a company
A person having atleast 20% of equity shares carrying voting
right.
 In other cases
A person entitled to atleast 20% of the profit of the concern.
 Exception to above clubbing
If income derived by the employed spouse from such concern
is due to his/her knowledge, technical qualification, work
experience etc. It shall not be clubbed with the income of the
spouse holding substantial income. (Taxable in the hands of
employed spouse)

11. If both spouses hold substantial interest in the same
concern
In this case, such income of a spouse shall be clubbed
with the income of the spouse having higher income.
Meaning of Spouse. The word spouse means husband or
wife, i.e. husband is spouse for wife and wife is spouse
for husband. Wife/ husband means lawfully wedded
wife/husband.

12. INDIVIDUAL ASSESSABLE IN RESPECT OF
INCOME FROM ASSETS TRANSFERRED TO
SPOUSE. [Sec. 64(1)(iv)]
 If any individual transfers any asset (other than
house property) to his/her spouse without adequate
consideration.
 Assets transferred means when an individual
purchases property in the name of his wife from his
own funds.
 The relationship of husband and wife should subsist
both at the time of transfer and at the time of accrual
of income.
 Any income from such transferred assets will be
included in the income of the transferor.

13. 1. If the assets are transferred before marriage.
2. If the assets are transferred for adequate consideration.
3. If the assets are transferred in connection with an
agreement to live apart.
4. If on the date of accrual of income, transferee is not
spouse of the transferor.
5. If a property is transferred by a Karta of HUF, gifting
coparceners property to his wife.
6. If property is acquired by the spouse out of pocket money
(i.e. an allowance given to the wife by her husband for her
dress and usual household expenses)

14. Any income accruing from asset which is transferred
after 1-6-1973 to daughter-in-law without adequate
consideration shall be considered to be the income of
transferor.

15. TRANSFER OF ASSET FOR THE BENEFIT
OF SPOUSE [SEC-64(1) OR FOR THE
BENEFIT OF SON’S WIFE[SEC-64(1)(VIII)
if an individual transfer any capital assets directly or
indirectly otherwise than for adequate consideration
to his/her daughter in law after 31.05.1973 for her
immediate or deferred benefit, then the income
derived by daughter-in-law from said capital assets
will be include in the income of the transferor.

16. In case assets transferred directly or indirectly by an
individual to his spouse or son’s wife (to be referred as
transferee) are invested by transferee :
 Investment in business must not in the form of
capital as a partner in the firm ;

17. In case investment is made as contribution of
capital as a partner in firm
The interest receivable by the transferee from the firm
calculated in proportion given below shall be clubbed
with the income of individual :

18.  The word child here means natural child, adopted
child, step child.
 Income derived by the minor child will be clubbed in
the income of the parent whose income is higher or
parent who maintains such minor child.
EXCEPTION
a. Manual work done by minor child
b. Activity involving application of his/her specialized
knowledge and experience.

19. EXEMPTION
U/s 10(32) parent can claim an exemption of income of
minor child so clubbed or RS. 1500 w.e is less.
Income of the minor child who is suffering from any of
the disabilities specified u/s 80U shall not be
clubbed.

20. TRANSFER OF INDIVIDUAL’S SELF
ACQUIRED PROPERTY TO THE H.U.F OF
WHICH HE IS A MEMBER [SEC - 64(2)]
 U/s 64(2)where an individual converts his individual
or self-acquired property into the common pool of
H.U.F of which he is a member after31-12-1969, the
income from such a converted property shall be
treated as under :
(a) The individual shall be deemed to have transferred
the converted property, through the family, to the
members of the family for being held by them jointly.
(b) The income derived from the converted property or
any part thereof shall be deemed to arise to the
individual and not to the family.

21.  If a transaction is considered to be a Benami
transaction, the income from such transaction shall be
taxable in the hands of the real person and so the
benamider is not taxed for the income arising from
such transactions.

23. If the assessee is a member of an Association of
Persons or a body of individuals other than Hindu
Undivided Family, any portion of the amount which he
is entitled to get is clubbed in the total income of the
assessee for the calculation of aggregation of total
income of the assessee.
 This income is tax-free as income tax is already paid
by the association of persons or body.

24. If the assessee is fails to submit any satisfactory
explanation or the A.O is not satisfied with the
explanation, the income is treated as assessee’s income
for any sum which is found in the books maintained
for any previous year.
DEEMED INCOMES

25. Where any sum is found credited in the books of an
assessee maintained for any previous year, and the
assessee does not give any explanation about the
nature and source of the sum so credited will be
charged to income tax as the income of the assessee for
that previous year.
 UNEXPLAINED CASH
CREDIT [SEC.68]

26.  UNEXPLAINED INVESTMENTS
[SEC.69]
o Where in the financial year immediately preceding the
assessment year, the assessee has made investments
which are not recorded in the books of account
maintained by him.
o The assessee offers no explanation about the nature
and source of the investments.
o The value of the investments may be deemed to be the
income of the assessee of such financial year.

27. UNEXPLAINED MONEY [SEC.69A]
Where in any financial year the assessee is found to be
the owner of any money, bullion, jewellery, or other
valuable article which are not recorded in the books of
account maintained by him.
The assessee offers no explanation about the nature and
source of acquisition then value of such things may be
deemed to the income of the assessee for such
financial year.

28. INVESTMENTS NOT FULLY
DISCLOSED [SEC.69B]
Where in any financial year the assessee has made
investments or is found to be the owner of any bullion,
jewellery or other valuable article.
The A.O. finds that the amount expended on making
such investments or in acquiring such things exceeds
the amount recorded in the books of account
maintained by the assessee, and he offers no
explanation about such excess amount.
The excess amount may be deemed to be the income of
the assessee, for such financial year.

29. UNEXPLAINED EXPENDITURE
[SEC. 69C]
Where in any financial year an assessee has incurred any
expenditure & he offers no explanation about the
source of such expenditure.
The amount covered by such expenditure, may deemed
to be the income of the assessee for such financial year.

30. PAYMENT OF HUNDI MONEY IN
CASH [SEC. 69D]
 Where any amount is borrowed on a hundi, or any
amount due thereon is repaid otherwise than through
an account payee cheque, the amount so borrowed or
repaid shall be deemed to be the income of the person
borrowing or repaying for the previous year in which
the amount was borrowed or repaid.
 Amount repaid shall include the amount of interest
also.